Globalisation is creating a more uniform regulatory landscape across jurisdictions as they adopt international standards. However, significant variation between countries and continents remains. In some instances, global and domestic legislation combine to amplify complexity.
International versus domestic — Companies setting up and running a business in a new jurisdiction need the right knowledge and support to achieve their aims.
It is easier for a local firm to incorporate than a foreign-owned one, with domestic companies facing an average complexity score of 4.3 out of 10 when incorporating, compared to 5.6 out of 10 for multinational firms. Reasons vary from basic linguistic barriers to local representation and procedural challenges. For example, banks may require copious additional information from foreign entities applying to open an account and signatories may need to be present. However, once firms are up and running, the gap narrows. The average complexity score for managing a business is 4.9 out of 10 for domestic firms and 5.3 for multinationals.
*The processes and procedures required by law to establish an operational entity. **The legal obligations for established firms to operate on an ongoing basis.
Four key themes about the causes of complexity emerged from our research:
The biggest challenge is likely to be rapid legislative change, affecting most jurisdictions. Overall, however, the global outlook is positive.
Technology is proving a powerful tool in reducing complexity. While adopting digital systems has created friction in some jurisdictions, it is streamlining processes in others. Online incorporation is a prime example. In some jurisdictions, including the British Virgin Islands (BVI), the Cayman Islands and Jersey, it can happen very speedily, sometimes in less than 24 hours. This increases their attractiveness to global investors. Harmonised rules signal an established business environment, making the process of compliance simpler for multinational companies.
Our experts believe their respective jurisdictions are moving in the right direction, creating opportunities for businesses. Even seven out of the ten ranked most complex predict they will develop more attractive business environments over the next five years. Businesses looking for overseas opportunities should cast their nets widely for the best expansion options.